2013 (5) TMI 579 - AT - Income Tax

Unexplained unsecured loan - assessee failed to produce loan creditors & prove identity and credit-worthiness of the creditor - Held that - Assessee has discharged its onus by filing confirmations from the donors, copies of acknowledgment of returns of the relevant assessment year, copies of PAN card, copies of bank statements and also contra confirmation. Once this is the position and none of the authorities below have gone into the details and not doubted the genuineness of the transaction or the creditworthiness of these creditors. Respectfully following the decision of M/s. Dataware Private Limited (2011 (9) TMI 175 - CALCUTTA HIGH COURT) that in the absence of any enquiry from the AO of the creditors, the AO cannot make the addition in the hands of the assessee by treating the loans received by assessee as unexplained.Thus delete the addiitions made allow the appeal of assessee. Undisclosed receipts - CIT(A) deleted the addition - Held that - Assessee is a co-owner in the building SKY STAR (SS). These co - owners entered into several lease agreements with various companies for letting out the property on rent and service charges. These rent and service charges were paid by the companies proportionately to the co-owners. Taxes on the same were also deducted at source and TDS certificates were issued in the name of respective co-owners. The assessee has explained that the sum of Rs.1,56,200/- being a contractual receipt i.e. service charges received from ICICI Bank vide lease agreement with ICICI Bank dated 20.02.2003, 16.10.2003 and 21.02.2003 & filed complete reconciliation and details of rent and service charges received from ICICI Bank. This sum of Rs.1,56,200/- is included in the business income of the Assessee and also TDS was claimed. In such circumstances CIT(A) has rightly deleted the addition. In favour of assessee. Bogus gift of immovable property - CIT(A) deleted the addition - assessee s brothers and mother have gifted their 1/8th undivided share in the above building Sky Star - Held that - The burden of showing that the apparent state of affairs was not the real one, very heavy burden lies on the department. In the facts and circumstances of the instant case, apart from circumstances which by themselves could be said to be neutral, there was no material to doubt the nature of the transaction and to hold that the same was income of the assessee. Every gift made or in regard to which no quid pro quo has been made in the absence of the same automatically the income from transaction cannot be made as income of the assessee u/s. 69. Without tangible material to suspect that the gift made by the relatives or without recording any finding or evidence the conclusion reached by the CIT(A) needs to be upheld. Even otherwise, the explanations offered by the assessee has not been rejected by revenue and in such circumstances, this issue of revenue s appeal is dismissed. - In favour of assessee.

Summary

Issues Involved:
1. Treatment of unsecured loans as unexplained cash credits.
2. Addition of undisclosed receipts.
3. Addition on account of bogus gift of immovable property.

Issue-wise Detailed Analysis:

1. Treatment of Unsecured Loans as Unexplained Cash Credits:
The primary issue in the assessee's appeal (ITA No. 1027/K/2010) was the confirmation by CIT(A) of the AO's action in treating unsecured loans of Rs. 13.25 lakh from Shri Subhash Chandra Gautam and Rs. 1 lakh from Shri Sushil Kr. Sad as unexplained due to the non-production of loan creditors. The assessee provided balance sheets, bank statements, confirmations, and IT returns to support the loans. The AO, however, found discrepancies in the bank statements and required the assessee to produce the creditors to prove their identity and creditworthiness. The CIT(A) upheld the AO's decision, emphasizing that the assessee failed to discharge the legal obligation to prove the genuineness of the transactions, citing various precedents. The Tribunal, however, found that the assessee had discharged its onus by filing necessary documents and that the AO did not conduct an enquiry with the creditors' AO. Following the Calcutta High Court's decision in the case of CIT Vs. M/s. Dataware Private Limited, the Tribunal held that the AO could not make the addition without such enquiry and deleted the addition, allowing the assessee's appeal.

2. Addition of Undisclosed Receipts:
In the revenue's appeal (ITA No. 1480/Kol/2010), the first issue was the deletion by CIT(A) of an addition of Rs. 1.56 lakh made by the AO as undisclosed receipts from ICICI Bank. The AO noticed that the assessee received this amount as contract receipts, claimed TDS on it, but did not disclose it in the return. The CIT(A) deleted the addition after considering the assessee's explanation and documents showing that the amount was included in the business income and TDS was claimed. The Tribunal upheld the CIT(A)'s decision, noting that the receipts were part of the business income and properly accounted for, thus dismissing the revenue's appeal on this issue.

3. Addition on Account of Bogus Gift of Immovable Property:
The second major issue in the revenue's appeal was the deletion by CIT(A) of an addition of Rs. 14.70 crore made by the AO on account of a purported bogus gift of immovable property. The AO questioned the genuineness of the gift of undivided shares in a multi-storied building by the assessee's mother and brothers, citing their poor creditworthiness and the lack of partition among co-owners. The AO treated the transaction as a relinquishment of rights with adequate consideration, applying Section 69B to add the market value of the properties as undisclosed investments. The CIT(A) disagreed, noting that the land was purchased and the building constructed by 8 co-owners, with income and taxes separately accounted for. The CIT(A) found no evidence of consideration paid by the assessee and held that the AO's reliance on stamp valuation for estimating undisclosed investment was misplaced. The Tribunal agreed, emphasizing that the gift was genuine, made out of natural love and affection, and properly documented. The Tribunal found no basis for the AO's suspicion and upheld the CIT(A)'s deletion of the addition, dismissing the revenue's appeal on this issue.

Conclusion:
The Tribunal allowed the assessee's appeal regarding the treatment of unsecured loans and dismissed the revenue's appeal on the issues of undisclosed receipts and bogus gift of immovable property. The Tribunal emphasized the importance of proper enquiry and evidence in making additions under the Income-tax Act.